HP TouchPad fire sale fallout

HP's TouchPad went on sale at the discounted liquidation price of between US$99 and US$149 this weekend, and it was telling on multiple fronts as techies drooled over a good deal, servers blew up and the tablet market pricing structure was upended.

commentaryHP's TouchPad went on sale at the discounted liquidation price of between US$99 and US$149 this weekend, and it was telling on multiple fronts as techies drooled over a good deal, servers blew up and the tablet market pricing structure was upended.

However, the fallout may go well beyond those areas.

HP's TouchPad liquidation fiasco hurts its reputation with consumers and businesses. HP's website couldn't handle the load as the masses tried to land a TouchPad for US$99. On Saturday, HP had a cart glitch that where the company's systems wouldn't recognise the liquidation prices. By the time HP fixed that issue, the company's e-commerce site served up a series of errors that looked like this:

Meanwhile, HP's call centre blew up. The reps did the best they could — and I had a good experience — but they were outgunned by orders. On Sunday morning HP made progress with its shopping cart — the site delivered 404 errors, which are a step up from database outages. HP spun this as a case of overwhelming demand. That's fair enough, but HP also sells IT infrastructure — adaptive infrastructure to be specific. Why didn't HP throw more servers at the problem? How about a few database admins? How about some cloud capacity to handle the demand spike?

In the big picture, HP could have turned this TouchPad liquidation lemon into lemonade. HP could have used its internal cloud to handle the spikes. If HP handled the traffic well, it could have spun a whitepaper out of it to pitch its wares. In the end, HP could have highlighted how its datacentres saved the day even amid TouchPad adversity.

Due to a cart glitch, HP's site for small to medium business buyers over the weekend was still charging the full price for the HP TouchPad, despite advertising the device at the liquidated price. The reality: if I'm an SMB, say one of those self-serve yoghurt joints popping up all around my house, I'm a bit sceptical about HP in the future. If I couldn't complete a TouchPad sale on HP.com how will the company run my infrastructure?

HP looks willy nilly. We've heard through the grapevine that Todd Bradley, the guy who runs HP's PC business, didn't find out that the company was going to spin off the unit until a Wednesday night dinner at CEO Leo Apotheker's house. It's no wonder that the news of HP's PC unit spin-off looked rushed. The inability to handle the e-commerce load for the TouchPad liquidation also highlighted a lack of planning. And the US$10 billion purchase of Autonomy also looked a bit jittery and leaves the company vulnerable. Don't be surprised if Oracle launches a hostile bid for HP within a year. Now we're sure that Apotheker and HP's board has a well thought out master plan, but it's hard to argue for an IBM moment for the company right now. The problem: HP appears to be winging it. In business, perception can become reality in a hurry. The TouchPad liquidation is another data point for HP critics to use.

Retail partners are going to be wary of HP going forward. Some outlets went with HP's liquidation pricing right away. Others chose to sit out the sale. Best Buy flip flopped. Amazon pulled out. In any case, HP will have to cover retailers on inventory and costs, but no future product launch from the company will be looked at the same way again. Killing the TouchPad in a mere seven weeks will be remembered for a long time.

Tablet pricing is shot. If the TouchPad — a flawed device that still managed to have a lot of redeeming qualities — calls for an exit after a few weeks and a US$99 to US$149 price tag what does that say for all the other Apple iPad rivals? It's no wonder retailers initially baulked at HP's prices. If the TouchPad is ultimately worth US$99, what's an Android tablet worth? How about US$250 max? HP's TouchPad experiment showed what price matters to consumers and the path to market share gains on Apple. The rub: no tablet maker can make money at HP's fire sale prices. Something has to give. BetaNews' Joe Wilcox argued that tablet pricing is ruined after HP's fire sale. I'm inclined to agree.